28 January 2016
With borrowing rates at historic lows and share markets volatile it’s no surprise that property continues to be a top investment choice for many.
But becoming a landlord is not as simple as sitting back and collecting the rent and comes with a set of responsibilities.
Landlords must ensure they are familiar with their rights and responsibilities under Australian law. Unfortunately many who manage their own rental properties aren’t and the rental process can become a burden when “the tenant is being difficult”.
Here are several things you should know about being a landlord:
1. Legal responsibilities
Landlords have a duty to guarantee the safety of rented property and its contents. Of most importance is that no injury or damage is caused to the tenants, neighbours or public as a direct result of the landlord neglecting his/her responsibilities.
These responsibilities include:
- Maintaining the structure and exterior of the house;
- Ensuring all ‘installations’ are working, such as gas, electricity and heating;
- Installation and appliance maintenance and safety (applies to landlord-owned appliances only);
- Treating potentially health-threatening issues; and
- Anything else stipulated in the tenancy agreement.
Additionally, and in accordance with section 66 of the Residential Tenancies Act 1997 (the Act), landlords and agents must give the tenant a copy of the booklet: “Renting a Home: a guide for tenants” on or before the day they move in.
2. Reference checks
Don’t skip on reference checks when assessing prospective tenants. If a tenant can’t provide the name and contact details of 2-3 people to vouch for their character and/or rental history, you should really question their capacity to fulfil the obligations of a lease.
3. The Bond
Landlords should ask for a bond to act as a security that tenants will meet the terms of the tenancy agreement. If tenants fail to keep the property clean, cause damage or don’t pay rent, the landlord (or their agent) can claim some or all of their bond at the end of the tenancy.
While a bond can be held against any damage to the property, it cannot be held against “fair wear and tear”.
In Victoria, bond money is held by the Residential Tenancies Bond Authority (RTBA) and the landlord/agent must provide the tenant with a completed and signed official ‘Bond Lodgement’ form to sign.
4. The condition report
When a bond is paid, the landlord (or agent) must prepare a Condition Report. This records the property’s general condition, including fittings and fixtures before the tenant occupies the rented premises and can be used as evidence if there is a dispute about who should pay for cleaning, damage, or replacement of missing items at the end of a tenancy.
The landlord or agent must provide the tenant with two copies of the signed Condition Report before the tenant moves in and all parties should keep their copy until the end of the tenancy.
5. The Rent
Rent can be paid weekly, fortnightly or monthly. If rent is paid weekly, the landlord cannot ask for more than 14 days rent at the beginning of a tenancy.
If any rental payments are late or not made, the tenant may be in breach of the tenancy agreement. If the rent is 14 days or more behind, the landlord or agent can give a 14-day ‘Notice to Vacate’.
The tenant is entitled to receive a receipt for each payment and a landlord may be fined if rules on providing rent receipt are not followed.
The landlord must pay all installation and initial connection costs for electricity and gas supply.
Where bottled gas is provided, the landlord pays for the supply or hire of bottles, and the tenant pay for the gas.
If the property has its own water meter, the landlord and tenant can negotiate a lease that includes payment by the tenant of water consumed.
7. Engage an experienced and well trained property manager
Being a landlord is not a 9-5 job and you will wear many hats: sales person, negotiator, debt collector and repairman to name but a few. This is where it makes sense to employ a property manager (usually a licensed real estate agent) to save you from a lot of headaches.
An agent will use their experience to find tenants, liaise with them to minimise potential problems, organise paperwork, inspections and maintenance, as well as maximise rental returns: all of which is usually too much for most property owners to take on themselves.
8. Smoke alarms
The landlord is responsible for fitting smoke alarms and a tenant should regularly check the batteries in the alarms.
Repairs are a landlord’s responsibility. However, if the tenant caused the damage, the landlord or agent can ask the tenant to arrange to repair it or pay for repairs they undertake.
A landlord must respond immediately to requests for urgent repairs. If you don’t do anything, the tenant has the right to arrange for urgent repairs to be completed up to the value of $1,800 – at the landlord’s expense.
The tenant must continue to pay rent even while waiting for repairs. However, if the matter has gone to the Victorian Civil and Administrative Tribunal (VCAT), the tenant can apply for the rent to be paid into VCAT’s Rent Special Account until the issue is resolved.
If unsure of what is classified as an “urgent repair”, consult your property manager or Consumer Affairs Victoria.
Non-urgent repairs must be carried out within 14 days in Victoria.
10. Visiting the property
Victoria has strict guidelines regarding when a landlord is permitted to enter their rented property. The landlord can enter a property at a date and time agreed with the tenant but the agreement must be made within seven days prior to entering.
The landlord can give the tenant 24 hours’ notice of intent to enter the property to:
- Carry out duties listed in the tenancy agreement, Residential Tenancies Act 1997 or any other Act;
- Value the property;
- Show the property to prospective buyers;
- Show the property to prospective tenants (within 14 days of the lease termination date);
- Verify a reasonable belief that the tenant has not met their duties as a tenant; and
- Make one general inspection in any six-month period, but not within the first three months of the tenancy.
At the end of the day, it’s about looking after your tenants, documenting all agreements in writing and good communication. If the thought of employing a property manager to take everything off your plate appeals to you, get in touch with a trained and experience Property Manager at Wood & Co who can make your property investment more profitable and less stressful.